Saskatchewan raises booze, tobacco taxes to balance budget

Jennifer Graham, The Canadian Press
Published Wednesday, March 20, 2013 10:57AM EDT
Last Updated Wednesday, March 20, 2013 8:35PM EDT

REGINA -- Drinkers and smokers will pay more and businesses will have to wait longer for a tax cut so that Saskatchewan's budget can stay in the black.

"I'm sure the two-pack-a-day smokers will not be pleased," Finance Minister Ken Krawetz said Wednesday before he tabled the 2013-14 financial plan.

"It's not out of line with what other provinces have. I think we're going to be one of the highest -- if not the highest -- at 25 cents (provincial tax) per cigarette. On the alcohol side, the markup ... is not that significant."

The tobacco tax was to increase at midnight and is expected to bring in $47.5 million from the four-cent increase per cigarette. The alcohol increase of about three per cent -- which kicks in April 1 -- is expected to generate $10 million in revenue.

The measures are necessary because the province is facing falling revenues from non-renewable resources, such as oil and gas or potash.

"It's no secret that resource revenues are down," said Krawetz.

"To achieve a balance, our government had to control spending and this budget does just that with a modest overall spending increase of just 3.1 per cent.

"To get there, we needed to make some choices. This may mean some groups in our province have a little smaller funding increase than they might have hoped for. Sometimes decisions have to be delayed."

For example, a promise by the government last October to cut the corporate income tax rate to 10 per cent from 12 per cent by 2015 is being postponed.

The business tax cut was intended to bring Saskatchewan's rate in line with those in Alberta and British Columbia. But the province can't afford to give up the $175 million the tax generates, Krawetz said.

The government expects to collect $11.61 billion in revenue in the next fiscal year and spend $11.54 billion -- leaving a thin surplus of $64.8 million.

By law, half of that surplus is to be transferred to the province's rainy-day account.

The budget was also balanced on a summary basis, which takes into account more areas of government including Crown corporations.

Reaction to the budget was mixed.

The Canadian Restaurant and Foodservices Association doesn't like the alcohol tax increase, which the province also raised to keep the 2010-2011 budget balanced.

Association vice-president Dwayne Marling said the latest hike will put another squeeze on restaurant owners.

"Owners are really faced with two options, neither one of which is particularly desirable," said Marling.

"One is to absorb yet another tax increase into their margin and take home less for themselves or to pass that tax increase onto their customers, which as we know every time the cost goes up, consumption tends to go down."

Universities and regional colleges are getting a 2.1 per cent increase to operate -- less than they had wanted.

The University of Regina had hoped to see an operating increase of between four and five per cent. It will get 1.95 per cent, according to president Vianne Timmons.

Timmons said departments had already been asked to cut three per cent from their budgets.

"It's getting really tough," said Timmons.

"I want to be really clear, we have pretty well cut almost everywhere we can in terms of efficiencies. As a university our administrative costs are very low compared to the national rate in universities...so if this is a trend, we've got some tough slugging ahead."

Kent Peterson, a graduate student at the University of Regina and the Canadian Federation of Students' representative in Saskatchewan, said the 2.1 per cent operating increase will mean program cuts, staff layoffs and higher tuition fees.

Peterson said more money for a program that refunds part of tuition fees if new university graduates stay in Saskatchewan doesn't go far enough.

"It's a back-ended tax credit, which means you will have already made it through university, incurred that student debt and then if you managed to do that you can apply for this tax credit," said Peterson.

"This government's priority is wrong. They need to focus on upfront barriers to education, not back-end tax credits."

Other budget initiatives include $2 million for a home-care pilot program for seniors in Regina that is aimed at preventing hospital admissions. Low-income seniors will get $10 more a month under their income plan to bring the benefit up to $250 a month.

There is a $1.5-million increase for the Saskatchewan Apprenticeship and Trade Certification Commission to set up 300 more training spots.

The Opposition NDP criticized the budget for falling short on health care and education.

NDP finance critic Trent Wotherspoon said it does little to deal with the pressure of 4,500 new students. Wotherspoon was also critical of plans to build hospitals and school with public-private partnerships.

The Canadian Taxpayers Federation was not pleased to see the so-called sin taxes -- alcohol and liquor -- going up. The federation said it wanted to see a bigger focus on spending control so that the government has "more wiggle room" in the surplus.

But overall, the federation's Colin Craig said he thinks it's a good budget.

"It's probably going to be the best budget that you'll see in Canada this year, and that's not to say it's a 10-out-of-10 budget but because the rest of Canada is swimming in debt," said Craig.

"We're pleased more than anything that it's a balanced budget.

The province also says it will update the way it collects uranium royalties. The changes mean producers would be able to deduct more of their expenses when they invest in capital. The government expects the change to cost the government $15 million, but it is expected to generate more investment in mines, more royalties in the long term and more jobs in the North.

"Other places in the world have taken over as the most competitive place to build a new mine or expand a mine and we want to change that," said Saskatchewan Premier Brad Wall.

Wall said it's important because the sector employs a lot of First Nations people.

On the budget overall, Wall said the government didn't want to cut taxes, increase spending and run a deficit. He said a balanced budget was the goal, even if it's not "a history-making budget."

"There are projects in it that are very important, but the overall budget is probably not going to stand out on its own. But I think it will stand out as a part of a series of budgets, of balanced budgets," said Wall.